The Office for National Statistics (ONS) has revealed that consumer price index inflation hit 9% in April, its highest level in more than 40 years.
Commenting on today’s inflation figures for April, ONS Chief Economist Grant Fitzner said “Inflation rose steeply in April, driven by the sharp climb in electricity and gas prices as the higher price cap came into effect. Around three-quarters of the increase in the annual rate this month came from utility bills.
“We have also published new modelled historical estimates today which show that CPI annual inflation was last higher forty years ago.”
“Steep annual rises in the cost of metals, chemicals and crude oil also continued, along with higher prices for goods leaving factory gates. This was driven by increases for food products, transport equipment and metals, machinery and equipment.”
StepChange Director of External Affairs Richard Lane said “The widening gap between people’s incomes and the cost of their essential spending is opening up problematic fault lines in household finances and contributing to debt problems, especially for lower income households whose budgets have little ability to flex.”
“While we don’t doubt that policymakers are aware of the problem, at present the measures being taken to plug the gap are simply not sufficient to help many households avoid incurring debt as a result of the rising cost of living.”
“We need to see targeted support specifically aimed at those households whose budgets don’t have the bandwidth to absorb higher costs – such as people on low incomes and relying on social security for some or all of their income, and those with vulnerabilities that mean they have specific needs and cannot cut their spending in areas such as energy or food. These groups are already over-represented among those experiencing problem debt, and there is no time to lose if their financial situation is to be prevented from worsening drastically over the coming months.”
StepChange urges anyone worried about the rising cost of living to explore the support available – the charity’s cost of living hub is a useful starting point.
Jane Tully, director of external affairs and partnerships at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said “Today’s inflation figures should raise the alarm on the urgent need for support for households struggling to cope with rising prices.”
“At National Debtline and Business Debtline we are already hearing from people whose incomes are unable to cover essential costs. Unless further action is taken, our fear is that more people will be left with impossible choices trying to meet basic needs.”
“With borrowing on the rise and budgets in such a fragile state, there is also a real risk of an increasing burden of debt at the worst possible time.”
“Targeted support, including uprating benefits in line with inflation, is urgently needed to help people feeling the strain now.”
Federation of Small Businesses (FSB) National Chair Martin McTague said “The gulf between the rate of input and consumer price growth underscores business efforts to absorb costs rather than pass them on. Small firms in particular find it hard to pass higher operating costs onto customers, fearing that doing so will hamper competitiveness.”
“More and more are being left with no choice, however, as inflationary pressure collides with an increasingly tight labour market, making it harder and harder to find the right people, and pushing up the wages needed to keep them.”
“We hear a lot from politicians about the cost of living crisis, but very little about the cost of doing business crisis which underlies it.”
“The Government must now look at targeted interventions that will do most for local economies hardest hit by the pandemic which are now faced with low growth and surging inflation.”
“It can’t control the wholesale price of oil and gas, but it can go further to help small firms with property costs – increasing the ceiling for small business rates relief and extending the energy support issued via the council tax system to the rates system.”
“With employment costs, including national insurance, now way up on where they were this time last year, installing a sick pay rebate for the smallest businesses would give them a measure of breathing space.”
“Our debilitating poor payment culture worsened over the pandemic. Here we have an area where government can take action – by making audit committees directly responsible for supply chain practice – without it costing a penny.”
“More widely, with so many firms lost over lockdowns, we need policymakers to come forward with the Enterprise Strategy that we were promised a long time back – clearly outlining how, now we’ve lost the New Enterprise Allowance, government intends to spur those thinking about starting up to turn vision into reality, thereby shoring up our already foundering recovery.”
Kitty Ussher, Chief Economist at the Institute of Directors, said “While this high rate was to be expected given the rise in the retail energy price cap, it is nevertheless shockingly high.”
“Business leaders tell us that the UK macroeconomy is now their number one negative issue, driven by worries over inflation. As a result, firms are becoming more reluctant to invest, storing up problems for the economy in future.”
“If the Chancellor intends to intervene in advance of the further price cap rise in the autumn, he should make that clear, to start bringing expectations of future inflation back down.”
Douglas Grant, Group CEO at Manx Financial Group said “Today’s announcement should come as a major wakeup call to the just how significant the rise in inflation will be but also just how difficult the remaining half of the year is going to be. We believe that demand for working capital, which has already reached unprecedented levels, will soar even further as more businesses desperately require liquidity provisions to counteract rising interest rates, supply chain issues, increases in wages and additional pandemic-induced headwinds. With the cost of borrowing set to increase, many SMEs are struggling and will continue to be challenged this year.
“Having successfully deployed multiple relief schemes – BBLS, CBILS and RLS – for SMEs throughout the pandemic, the UK government should, in our opinion, now turn their attention towards a permanent loan scheme to help leverage businesses going forward. Now is a vital time for the Government to work together with traditional and alternative lenders to guarantee the future of our SMEs and to ensure the successes of these emergency schemes are not wasted.”
“As we look towards the post-pandemic era many SMEs are at a critical tipping point, some between failing and surviving, others between surviving and thriving. As the government looks for ways to power the economy’s resurgence, the importance of a permanent scheme cannot be understated, it could act as the fundamental difference between make or break for many companies, and in turn, our economy. SMEs would be well-advised to take stock of their current capital structure and if appropriate, access fixed term, fixed rate loans to prevent additional exposure to an increasingly volatile lending market.”